Nigerian Banks Rush to Recapitalize Amid New CBN Requirements

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As Nigerian banks race to meet new recapitalization requirements set by the Central Bank of Nigeria (CBN), many have initiated or finalized plans to raise equity funds through rights issues and public offerings.


In a bid to enhance their capital base, NGX-listed banks are leveraging these financial instruments to attract investment from the public. A rights issue allows existing shareholders to purchase additional shares at a discounted rate, while a public offer involves selling shares to the general public to generate capital.


Fidelity Bank Plc has taken the lead, launching a significant capital-raising initiative. The bank aims to raise up to N127.1 billion through a combination of a rights issue and a public offer. This initiative allows existing shareholders to increase their stakes and invites new investors to participate in the bank's growth.



 Central Bank's New Capital Requirements

The CBN's new regulations, effective from April 1, 2024, mandate a tenfold increase in minimum capital requirements for banks, with a compliance deadline of March 31, 2026. The objective is to create stronger, healthier banks capable of supporting Nigeria’s ambitious economic goals, including a $1 trillion economy by 2030.


Banks Mobilizing for Fresh Capital

Several other banks have also started their capital-raising efforts:


- GTCO Plc: At its recent AGM, shareholders approved a plan to raise up to $750 million through various means, including public offerings and rights issues. The bank has filed a preliminary prospectus with the SEC for a proposed offering of up to N500 billion.


- Access Holdings Plc: At their AGM, shareholders approved raising up to $1.5 billion, with N365 billion specifically through a rights issue.


- FCMB Group Plc: Shareholders approved a significant capital increase and a N150 billion raise to support growth and maintain their international license.


- Stanbic IBTC Holdings Plc: Received approval for a N400 billion debt issuance program and an additional N150 billion in equity capital.


- FBN Holdings Plc: Authorized to raise N300 billion through various channels, including public offerings and private placements.


- Ecobank Transnational Incorporated (ETI): At its recent AGM, shareholders authorized raising up to $600 million in debt instruments.


- United Bank for Africa (UBA): Shareholders approved raising additional capital through diverse financial instruments to meet the CBN's requirements.


 Recapitalization Strategies

Banks are employing various strategies to meet the CBN’s stringent capital requirements. These include:


- Wema Bank: Completed the first tranche of its recapitalization exercise and secured approvals for a N40 billion rights issue. The bank plans to raise an additional N200 billion.


- Zenith Bank: Recently approved to transition to a holding company structure and to issue 31.3 billion new shares to raise capital.


- Sterling Financial Holdings Company: Seeking approval to raise N200 billion through a rights issue, offering 40 billion shares to existing investors at discounted prices.

The recapitalization drive among Nigerian banks reflects a concerted effort to strengthen their financial positions and comply with the CBN's new capital requirements. This proactive approach is expected to create a more resilient banking sector capable of supporting Nigeria's long-term economic objectives.



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